President Trump next, now what?

On November 12, 2016 by Phil Champagne

We know that if Clinton had been next President, corruption, spending, and more lost of freedom and liberty would have continued to prosper and rule in DC. But now that we know it is Trump, what does that mean for you and, well all things government in terms of interferences into our lives and investment.

Trump has never been a politician before so we do not have any idea of what kind of politician he will really be. We can only make suppositions and speculations based on the speech he has given so far but as we have seen this so many times, including with Obama, that once elected “things changes”, leading to altered promises. Therefore, only time will tell what a President Trump will mean.

The challenges are enormous for the next President. Considering that a large portion of the public has been conditioned to be taken care of by a flat broke Government that they believe to have unlimited financial capacity to respond to every needs (“free” health care, “free” college, and you name it), the recipe is complete for manifestation of all kinds. The hidden power behind the government (ie: the banksters mafia) have managed to delay the inevitable world market crash so far. You can be sure that this coming crash will be 2008 on steroids. I would have a good guess of what a President Clinton would have done in response to such situation, something similar (but proportionally much bigger) to what the Obama regime has done in response to the 2008 crash such as cash for clunkers and quantitative easing (sophisticated term for printing dollars) – to name a few.

These artificially low interest rates (look at the chart in my prior post) have created an artificial bubble in multiple asset classes with the opportunity for cheap money to finance it. Did that help the common person with lower income do you think? While the Democrats (and sometimes some republicans) are branding themselves as the saviors of the poor, they are promoting policies that makes it more difficult for these families and individuals to get out of poverty.

Before continuing, let’s review some of the promises that are the most relevant to your investment – taxes. Now, there are 2 proposals on the book, one from the House Republicans and one from Donald Trump.

trump-tax-gs

There are other policies also discussed such as tax benefits on child care and repeal the death tax on capital gain up to $10 million.

Have you noticed the pass-through rate dropping to 15%!

What’s interesting is that on some elements, the House Republican proposal is more interesting than that of Trump, as for example is the case for Capital gain and dividends tax rate. Since both the House and Senate are controlled by the Republicans, I would assume the tax plan will end somewhere in the middle between the House Republican proposal and Donald Trump’s plan which will be a dramatic improvement from what we have so far.

Donald Trump himself has warned that the market was in bubble territory, so I am convinced he obviously knows what is coming. The question is what are the plans he has in mind to face this situation, and whatever they are, they have not been shared. But I can share with you what I think a President Clinton would have done:

  1. Upon the crash, Clinton would be working with the bank in implementing Bail-ins (some of the legislation have already passed in the US as well as in other country like Canada). (A reminder, as opposed to bail-outs where the taxpayers are funding the failing banks, a bail-ins is where the failing bank recapitalize itself from their own depositors)
  2.  But bail-ins would not be sufficient, so bail-outs will also have been involved with Clinton.
  3. Clinton would have probably used this crises to ban cash (only electronic money), so that everyone’s fund are locked up in banks with many restrictions in capital flow.
  4. Higher taxes regardless of crises, but this crises would have given her more power to do so.
  5. And HUGE government spending to reflate everything to counteract this deflating mother of all bubble.

The real solution is for the government to fix money – to let the free market use whatever it wants as money, but particularly, just as the constitution state, gold and silver. Interest rate would be set by the market rather than PhD-carrying Bureaucrats like Yellen and as such would never be too distant from what the economic reality requires.

Again, I’m sure he knows what is coming, but it is not clear exactly how he will react. If say a true Libertarian candidate such as Ron Paul was the one taking office in January 2017, he would still need to deal with the existing Medicare/Medicaid and Social Security after taking care of reducing the Department of Offense budget (which I remind is about 10 times as large as all other countries combined).

Considering that we will have a real estate investor in the White House, we can easily assume he will look forward for this to do well in the future. He will not be able to prevent the crash, but his reaction will most likely be focusing on reinvigorating it afterwards which requires an improved economy.

Will he handle it the way that the depression of 1921 was handled? This was a painful but short great depression (before the great depression of 1929) that lasted only a year and a half.

His plan to rebuild infrastructure… where will the money come from?

Does he plan to privatize it so it can be self-financed by the private sector rather than the current broke Federal Government? By selling say, federal highways and bridges, the Federal Government would improve its own fiscal health while letting the private sector take care of the deprecated infrastructure.

On the other hand, does he intend to print the cash and increase the debt and go into a spending spree? How much different that would be?

Let’s not forget that the current US dollar notes from the Federal Reserve is a flawed system that requires the government to keep increasing the debt otherwise we will run into a deflationary spiral. I’m guessing Donald Trump knows this already, the question is what does he intend to do about it?

Time will tell

Phil Champagne, Managing Director, Wren Investment Group, LLC.

Note: We currently have no real estate investment opportunities available. The current market conditions prevent us from finding anything of value (not over inflated in price).

 

 

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